In the midst of budget debates and continued concerns over the Affordable Care Act (ACA or health care reform), a number of House Representatives and U.S. Senators, stakeholders, and policymakers have begun to focus their efforts on ways to bring innovation in medical and scientific research back to the forefront of American health care policy.
For example, over the past several months, two pieces of legislation have been introduced to help America progress in the field of medicine and science, and to maintain our status as a world leader in healthcare. First, the American Research and Competitiveness Act (H.R. 942), which has bipartisan support, would make a research-and-development tax credit a permanent part of the federal tax code. The tax credit would be extended to all “types of companies investing in research and development, not just med-tech concerns.” Such a credit holds significant promise for big med-tech companies because they “spend anywhere from 8 to 13% of their annual revenue on R&D—a crucial component in the development of new products.
Second, the Senate recently passed the “America Invents Act” (S. 23), a bill that would overhaul the U.S. patent system by changing it from a first-to-invent to a first-to-file system. Additionally, the National Institutes of Health (NIH) will begin a new office that will focus on early stage drug development and research.
While these changes and others are being considered in Congress, there are still a number of questions and issues that must be addressed to ensure that the government and federal policies support continued research and development to find cures and treatments for diseases that cost Americans billions of dollars each year. One of the problems America currently faces is that “life sciences companies have no alternative to re-investing in developing more drugs, biologics, and medical devices.”
A recent post from FDA Matters, explored the nature and need for incentives to conduct life sciences’ research. As the article points out, “the government’s goal in incentivizing certain life sciences research is to stimulate activity that meets or resolves societal needs (e.g. drugs and devices for cancers, therapies for rare diseases, treatments for tropical diseases). Idealistically, the incentives encourage vital, new activity without providing subsidies for research that would have occurred without incentives.” However, “the reality is different.”
To explain how the current regulatory system in the U.S. fails to adequately incentivize life sciences’ research, the article identified three broad categories of public incentives for research:
Ordinary research incentives. These are the incentives available for all corporate-supported research. These include the research and development (R&D) tax credit, access to government technology transfer programs and patent protection. For most industries, and even most life sciences research, these seem sufficient to stimulate a high-level of research investment.
Upgraded incentives. Ordinary research incentives are sometimes not enough to stimulate life science research that will benefit society. As a result, Congress has created a number of upgraded incentives for medical product development.
For example, Congress has provided partial patent term restoration for drug companies experiencing particularly long delays in receiving marketing approval. This has led to increased research investment (as well as boosting the generic drug market as part of the same legislation).
Also, Congress created the Orphan Drug Act to provide incentives for research on drugs for rare diseases/small populations. This law incorporated a number of incentives, notably up to seven years market exclusivity for any new orphan indication on a drug.
FDA also provides a number of upgraded incentives for particular types of research through its expanded access and accelerated approvals programs. User fee waivers granted to first products from new companies also stimulates research investment.
Extraordinary incentives. Congress may consider incentives designed to dramatically alter the normal risk/reward/certainty calculation that usually precedes research investments. The only example the author could think of is in 2007, Congress enacted a program that awards a “priority review voucher” for successful development of a new treatment for a neglected tropical disease. Owning a voucher entitles a company to ask for a priority review (6 months) by FDA of an unrelated product that would otherwise be granted a normal review (10 months). Currently, Congress is looking at legislation (S. 606) that would extend this voucher program to developers of products to treat pediatric rare diseases.
Conclusion
Ultimately, “it is up to Congress to decide whether to encourage particular life sciences research beyond the ordinary incentives.” It is important for Congress to create these incentives because they will stimulate substantial additional research….and the development of many new drugs that are particularly beneficial to society. Without these incentives, pipelines for drug companies may remain empty, and patients will suffer. Moreover, overly tight restrictions on program eligibility result in understimulatoin of needed research. As a result, the article recommended that, “when creating incentives and, also, assessing their impact later, Congress needs to take the broad view of the societal good that can be achieved by upgraded and extraordinary incentives for research.”